MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending a $10.3 million loan to assist in the ongoing development of Cambodia's financial sector and ensure a sound, efficient, and market-oriented financial system.
The loan will fund the implementation of the second subprogram under the Financial Sector Program II (FSP II) Cluster that was approved in December 2007. The program cluster comprises four subprograms to be implemented over a four-year period to 2010. A separate $300,000 grant will help implement some of the key triggers of the third subprogram.
The overall goal of the program is to put in place a sound, market-based financial system by maintaining the momentum for reform activities aimed at building confidence and financial intermediation, enhancing resilience and efficiency, and promoting good governance. This is in line with the government's efforts to sustain economic growth and reduce poverty.
"With the recent global financial crisis, Cambodia needs more than ever to have a sound and efficient financial system that will contribute towards sustaining broad-based economic growth," said Samiuela Tukuafu, Senior Financial Sector Specialist of ADB's Southeast Asia Department. "An efficient and sound financial system will help reduce poverty by lowering the cost of doing business, increasing job opportunities, and extending the outreach of services to poor and rural areas."
The first Financial Sector Program Cluster (2001 - 2007) has yielded encouraging results as Cambodia's financial sector continues to deepen with more services being introduced. Credit to the private sector has increased to 22.9% of gross domestic product as of June this year compared to 6.5% of GDP in 2000. Total deposits also rose to 25.8% of GDP in June 2008 from 9.2% in 2000. The government is working towards establishing a capital market in the near future.
The program will focus on improving confidence and financial intermediation by upgrading the payments, clearance, and settlement systems; improving public financial disclosures and establishing a credit information bureau; establishing a registry of tradable government securities; and improving the outreach of microfinance institutions.
To maintain stability in the financial sector, the law on banking and financial institutions and related regulations are being updated; the supervision of banks and microfinance institutions is being strengthened; and a new law on commercial contracts is being developed.
The program will also promote good governance by implementing international initiatives on anti-money laundering and counter-financing of terrorism; promote corporate governance and transparency in the insurance sector; establish commercial dispute resolution mechanism; and increase the number of qualified national accountants and auditors. A fully computerized management information system for the National Bank of Cambodia to enhance its efficiency is one of the key activities of the program.
ADB has been supporting the development of Cambodia's financial sector since 1999.